On August 1, 2024, Perez Communications issued $30 million of 10% nonconvertible bonds at 104. The bonds are due on July 31, 2044. • Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $60, one share of Perez Communications' no par common stock. • Interstate Containers purchased 20% of the bond issue. • On August 1, 2024, the market value of the common stock was $58 per share and the market value of each warrant was $8. In February 2035, when Perez common stock had a market price of $72 per share and the unamortized discount balance was $1 million, Interstate Containers exercised the warrants it held. Required: 1. Prepare the journal entries on August 1, 2024, to record (a) the issuance of the bonds by Perez and (b) the investment by Interstate. 2. Prepare the journal entries for both Perez and Interstate in February 2035, to record the exercise of the warrants.

On August 1, 2024, Perez Communications issued $30 million of 10% nonconvertible bonds at 104. The bonds are due on July 31, 2044. • Each $1,000 bond was issued with 20 detachable stock warrants, each of which entitled the bondholder to purchase, for $60, one share of Perez Communications' no par common stock. • Interstate Containers purchased 20% of the bond issue. • On August 1, 2024, the market value of the common stock was $58 per share and the market value of each warrant was $8. In February 2035, when Perez common stock had a market price of $72 per share and the unamortized discount balance was $1 million, Interstate Containers exercised the warrants it held. Required: 1. Prepare the journal entries on August 1, 2024, to record (a) the issuance of the bonds by Perez and (b) the investment by Interstate. 2. Prepare the journal entries for both Perez and Interstate in February 2035, to record the exercise of the warrants.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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